2022 (12) TMI 365 - AT - Central Excise

Interest and Penalty Upheld on Mistaken Cenvat Credit Reversal

Psl Ltd Versus C.C.E. & S.T. -Rajkot

Psl Ltd Versus C.C.E. & S.T. -Rajkot - TMI Issues:1. Whether interest and penalty can be imposed when the appellant reversed the Cenvat credit prior to utilization.2. Whether the extended period of limitation can be invoked in the present case.Analysis:1. The appellant mistakenly availed Cenvat credit at their Anode Factory in relation to another factory, which was later reversed upon department's pointing out. The department issued a show cause notice proposing to appropriate the reversed credit, charge interest, and impose a penalty. The lower authorities upheld the demand of interest and penalty. The appellant argued that since the credit was not utilized and reversed promptly, they should not be liable for interest or penalty. The appellant also claimed no malafide intention and that the extended period should not be invoked. The Tribunal held that interest is chargeable even if the credit was not utilized but wrongly availed, citing the Supreme Court judgment in Ind-Swift Laboratories. Therefore, the demand for interest was upheld.2. Regarding the penalty under section 11 AC, the Tribunal noted that the extended period was invoked, and the penalty is mandatory when demand under the extended period is sustained. Citing the Supreme Court judgment in Union of India Vs. Dharamendra Textile Processors, the Tribunal upheld the penalty imposition. The appellant's argument that the credit reversal before the show cause notice should reduce or waive the penalty was rejected. The Tribunal found that the appellant suppressed the wrong availment of credit from the department, justifying the invocation of the extended period. Therefore, the demand for the extended period and penalty was deemed sustainable. The impugned order was upheld, and the appeal was dismissed.